Venezuela Shows Strong Signs of Recovery as Unemployment Drops to Lowest Level This Year
Barinas, Venezuela, Dec 29 (Venezuelanalysis.com).- Venezuela’s economy continues to show strong signs of recovery a year after the devastating strike/lock-out and sabotage of the state oil company, sponsored by the political opposition to President Hugo Chavez between December of 2002 and February of 2003.
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| Increase in unemployment during the current administration has always been tied to actions by the political opposition to President Chavez. Source: National Institute of Statistics |
Unemployment rate fell to 15.5% in November, according to President Hugo Chavez, who read a report from the National Statistics Institute during his weekly television program this Sunday. As a result of last year’s opposition-sponsored industry lock-out and sabotage of the state oil company PDVSA, unemployment jumped from 15.7% in November of 2002 to 20.7% in January of 2003, which represents 760,846 lost jobs.
Chavez also highlighted the increase in the cement and electricity consumption, other signs of economic recovery. “We must highlight these things because the media will not do it,” said Chavez. During the program, the president of the Corporacion Venezolana de Guayana (CVG), Francisco Rangel Gómez, informed that the country’s production of iron, aluminum and coal, reached new records.
GDP drop for 2003
Venezuela’s 2003 GDP drop will be less severe than previously estimated. In the first trimester of 2003, Venezuela experienced a historic GDP drop of 29%, as oil production was paralyzed by sabotages to PDVSA refineries and installations, and by the upper-management work stoppage. According to government estimates, the country’s GDP for 2003 will drop between 10% and 11%, while private industry experts estimate a drop of 13%.
Sovereign Risk reaches new lows
The opposition-sponsored industry lock-out and sabotage caused Venezuela’s sovereign risk to reach 1,412 basic points in March of 2003. By December 24, Venezuela’s sovereign risk had dropped to 588 basic points, the lowest registered under the current administration. According to the Ministry of Planning and Development, the drop in sovereign risk points is linked to the increase in the country’s international reserves, favorable oil market conditions, good fiscal deficit management, successful debt refinancing operations, and the reestablishment of political stability.
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| President Chavez during his weekly TV program from the Barinas state, where loans, land titles and agricultural equipment were given to farmers. Photo: Venpres |
Economic Overdrive
Accumulated inflation for the month of November reached 24.8%, down from 29.9% in November of 2002, according to Central Bank figures.
The recovery of the state oil company PDVSA, the direct government spending in construction projects and social programs, and an aggressive support of small and medium-size businesses and cooperatives, have helped create jobs. The simultaneous construction of three new subways, a railroad and a trolley, a new bridge over the Orinoco River, and the support of small businesses through low interest loans, are examples of what the government calls “the economic overdrive”.
The mainstream private sector continues in stagnation due in part to anti-government positions held by the Federation of Chambers of Commerce FEDECAMARAS, and to strong currency controls implemented by the government to stop capital flight, which have made it harder for local companies to import materials.
According to an investigation conducted by Reuters, the Venezuelan economy will rebound by 6.7% in 2004, due to the recovery of the oil industry and a strong increase in public expenditures. The oil sector is expected to grow 15.5% after a decline of 18% in 2003 as a result of the oil industry sabotage. The non-oil sector is expected to grow 4.6%.
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| The Valencia Metro is on of the five railroad project currently under construction in Venezuela. Source: Simens Corp. |
“I swear that I will not rest until we have a healthy and beautiful Venezuela,” said President Chavez in his weekly TV program when describing the country’s economic recovery after the opposition lock-out and sabotage. Chavez has accused the opposition of trying to oust him by engaging in sabotage of the economy to create political instability, a tactic applied by Chile’s upper classes to overtrhow President Salvador Allende in 1973.
An economic recovery favors Chavez, who is facing a possible recall referendum on his mandate. Electoral authorities are to being validating signatures collected by opposition organizations to request a recall referendum on Chavez. If enough valid signatures were collected, the recall referendum could take place by the middle of 2004. Dozens of claims of fraud in the signature collection process have been filed with the National Electoral Council, and more evidence will be presented soon according to government officials.
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